Netted in Vice Probe, Spitzer Tries to Lessen Sting

Snared in a federal prosecutor's net and fighting to cut the best deal before his widely expected resignation as governor of New York, Eliot Spitzer, having prepared a draft notice of resignation, held on to it and to his office Tuesday.

As he did, members of his staff and that of the state's lieutenant governor prepared for what they hoped would be an orderly transition following disclosures alleging the liberal Democrat paid high-class hookers for sex, multiple sources said.

According to sources in New York's state capital and those involved in Spitzer's negotiations with federal prosecutors, Spitzer pulled back from his initial decision to resign quickly when advisers cautioned that if he had any bargaining chip at all, it came from holding on to his office until the outlines of a deal were reached.

According to sources, Spitzer could face federal charges under money laundering statutes as a result of the way he allegedly manipulated his own funds in possible violation of bank secrecy laws to pay for his allegedly illegal activities -- sex with prostitutes.

As negotiations took place behind closed doors, word quickly spread through Albany's corridors that Spitzer's top aides and family members were suggesting he could fight to stay in power. Equally quickly, word spread among both Democratic as well as Republican lawmakers that perhaps an ugly impeachment battle would have to be waged to dislodge Spitzer, a one-time white knight who took on Wall Street's moguls as the state's attorney general, from office. The rhetoric may have been overheated, but it captured the magnitude of the aftershock of the disclosures of Spitzer's alleged public misconduct.

Spitzer, who has held office for 14 months, is alleged by multiple sources to have spent "thousands and thousands" of dollars on multiple trysts with high-class hookers during the time he has been governor. A ball park estimate of about $40,000 has been bandied by sources close to the investigation. There was no confirmation on this or any other aspect of the federal investigation either by the FBI, the Internal Revenue Service or the U.S. attorney.

No charges have been levied against Spitzer.

There seemed little doubt in anyone's mind Spitzer's resignation would be forthcoming.

"It is inevitable; it is just a question of when," said one cabinet-level New York state official.

Lt. Gov. David Paterson and his chief of staff reportedly spent the morning reviewing organization charts and assessing which members of the Spitzer administration might be kept on once he resigns.

At the same time, political sources say Spitzer's lawyers are already in negotiations over what criminal charges the governor could face in a plea negotiation.

One source said prosecutors are focusing only on financial crimes involving alleged violations of the law in the way Spitzer moved money through a series of accounts to pay for his prostitutes.

An offer to resign as governor could be part of any negotiated package, according to former prosecutors.